Warren Buffett warned President Donald Trump about the impact of tariffs in a recent interview with CBS News Sunday Morning. Buffett described tariffs as “an act of war to some degree” and noted that they are essentially a tax on goods that eventually affect consumers. “I mean, the tooth fairy doesn’t pay them,” Buffett said, highlighting how tariffs lead to higher consumer prices over time.
Last week, the Trump administration implemented 25% tariffs on Canadian and Mexican imports and an additional 10% tariff on Chinese imports. This decision sparked a trade war, resulting in retaliatory tariffs from these countries. However, just a few days later, Trump paused the tariffs on Canadian and Mexican imports under the United States-Mexico-Canada Free Trade Agreement, creating uncertainty about his long-term plans.
Trump’s fluctuating stance on tariffs has left investors unsure whether these measures are temporary bargaining chips or part of a sustained policy. This uncertainty has been challenging for the market, which struggles to price in this unpredictable factor. Buffett also pointed out that prices will be higher in the future, which is likely an allusion to the natural rise in consumer prices due to inflation.
Buffett warns of tariff impact
His comments underscore the belief that tariffs exacerbate this inflationary pressure. Inflation has been an ongoing concern for Americans, especially after the COVID-19 pandemic caused consumer prices to surge.
Although Trump’s campaign promised to lower prices, his administration’s trade policies have indicated otherwise. U.S. Treasury Secretary Scott Bessent recently commented that “access to cheap goods is not the essence of the American dream.” At the same time, Trump acknowledged potential short-term economic pain from his actions. Confirming suspicions about Berkshire Hathaway’s inactivity over the past year, the company kept its investment activity low in 2024 despite a booming market driven by enthusiasm for artificial intelligence.
Berkshire sold off more stocks than it bought and stockpiled a significant amount of cash, showcasing Buffett’s cautious stance amid market volatility. As uncertainty around consumer sentiment and tariffs grew, Buffett’s remarks clarified that he believed tariffs could lead to higher consumer prices and inflation if the trade war continues. Warren Buffett’s rare intervention in political discourse emphasizes his concern over the economic impact of tariffs.
His warning to President Trump is clear: sustained tariffs could result in higher consumer prices, affecting the economy in the long term.
Image Credits: Photo by Galen Crout on Unsplash
